Alternative approaches to implementing Lagrange multiplier tests for serial correlation in dynamic regression models

Authors:
L. G. Godfrey
Affiliations:
Department of Economics, University of York, Heslington, York YO10 5DD, UK
Venue:
Computational Statistics & Data Analysis
Year:
2007

Citing 3
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Abstract

An approximate F-form of the Lagrange multiplier (LM) test for serial correlation in dynamic regression models is compared with three bootstrap tests. In one bootstrap procedure, residuals from restricted estimation under the null hypothesis are resampled. The other two bootstrap tests use residuals from unrestricted estimation under an alternative hypothesis. A fixed autocorrelation alternative is assumed in one of the two unrestricted bootstrap tests and the other is based upon a Pitman-type sequence of local alternatives. Monte Carlo experiments are used to estimate rejection probabilities under the null hypothesis and in the presence of serial correlation.